? UBS Asset Management plans to launch a closed-ended debt fund in Europe in late 2018 or early 2019.

? The Spanish and Italian markets offer UBS the best growth prospects in European real estate.

? The company is focusing on growing its income from assets, as further capital appreciation is unlikely at this late stage in the real estate cycle.

Eoin Bastible is head of business development, Europe, for real estate and private markets at UBS Asset Management, a subsidiary of UBS AG. UBS Asset Management manages around $100 billion in real estate and private markets around the world, with approximately $90 billion of investments in real estate and $10 billion split between infrastructure and private equity, according to Bastible. S&P Global Market Intelligence sat down with him on the sidelines of the MIPIM property conference and exhibition in Cannes, France, to find out how one of the world's largest real estate asset managers sees the European market, and what it has planned for 2018. What follows is an edited transcript of the conversation.

S&P Global Market Intelligence: UBS Asset Management is one of the world's largest investors in global real estate with €90 billion of assets under management. What opportunities for further growth does the company see despite its already considerable reach?

Bastible: We're looking to expand our core programs in Europe over the course of this year and next year, and Asia-Pacific is being considered in the slightly longer term. We launched a closed-ended debt fund in 2013 in the U.K. That's fully invested; it's gone very well for us. We plan to launch a similar type of fund in Europe later this year or early next year. That would complement well given the U.S. debt fund that we have.

London is a key market for most real estate investors of UBS' scale. How is UBS approaching the market given the uncertainty created by the U.K.'s decision to leave the European Union?

Our balanced flagship fund in the U.K., Triton Property Fund, which is invested in office, retail, student housing, logistics and so on, has been going underweight London for the last number of years since even before Brexit. We've been underweighting London offices for a number of reasons.

Firstly the Brexit question, but also our feeling that there was quite a lot of new supply coming into the market, so that was going to have an impact on rents going forward. We had stronger conviction in other sectors in the U.K. For example, in logistics where we have a strong overweight. We have an overweight position in retail warehousing as well because we quite like that area.

We have bought in London in the last 12 months, don't get me wrong. We're not shutting up shop in London. We just have to be a little bit choosier about what we invest in, and we want to see a growth story around that particular asset or location.

Which European markets does UBS see as the most attractive growth stories at the moment?

We think there's a growing interest in southern European markets, particularly Spain and Italy. Spain has made a lot of interesting changes to their labor laws, positive changes to their labor laws post the financial crisis, and that flexibility that it has introduced into the market has meant that it's become a lot more investable from our perspective.

We believe that Italy is looking at something similar. Whether the new government is willing to push forward with that is a different thing — who knows? But those two markets have come out of the crisis and have been stronger growth markets than, for example, France and some of the other northern European countries.

Does UBS share the gloomy perspective many observers have about retail?

Retail is still a very strong-performing asset when you've got the right assets. There's no point in looking at retail as a whole sector because it doesn't give you anything like the right information. There's been a huge dichotomy between the haves and the have-nots in retail. The strong and dominant shopping centers have done extraordinarily well. The destination cities both in Europe and the U.K. have done extraordinarily well. It's just that everything else has done very poorly and has been killed by the internet, e-retailing.

Our focus on retail has been on dominant shopping centers. They don't have to be in capital cities; it could be in a small regional city but we want to make sure that the center is the best center, and that no other competing center can draw away from it. And then we spend a lot of time actively asset-managing those centers to make sure that we can continue to deliver growth.

The current real estate cycle is around a decade old. What is UBS's assessment of how long it has left to run, and how does this affect your approach?

It's almost impossible to say where we are in the cycle. Someone interestingly described it when he was asked the same question: He said, "I don't know, but I think there's more runway behind us than ahead of us." That was probably a neat way of describing it.

What I would say, though, is that being here [in Cannes at MIPIM] for the last two and a half days, and having met with a lot of investors from both Europe and Asia, it's clear to me that investors are conscious of the fact that we are towards the top of the cycle, or we are certainly long into the cycle. But they are still allocating to real estate because on a risk-adjusted basis it still looks attractive, on a historical basis the spread over government bonds still looks attractive, so there are still allocations coming into the market.

Our general mindset at the moment, though, is that given where we think we are in the cycle, we have less of a focus on capital appreciation or yield compression. That's all finished, that's all happened. With any acquisitions it's all about how can we grow income.